Calif. Thrift Dying After Tex. Securitizer Cousin Fell Ill

A troubled Southern California thrift is quietly shedding its branch offices and will soon close its doors for good.

FirstPlus Bank in Tustin, once a thriving thrift and loan association that focused on high-loan-to-value home equity loans, has closed two branches and made deals to sell its three others.

When the last branch has been sold, which is expected to be next month, FirstPlus will voluntarily surrender to the state its license to operate, said Ed Carpenter of Ed Carpenter & Co., the investment banker helping FirstPlus sell its branches. It will continue to operate as a corporation with a skeleton crew of employees, servicing the remaining $30 million loan portfolio until a buyer is found for these assets, Mr. Carpenter said.

The thrifts woes began in late 1998 when its sister company, FirstPlus Financial Inc. of Dallas, ran into trouble after the market for its securitized mortgage pools dried up.

The Texas company packaged mortgage loans it had either originated or bought from FirstPlus Bank and resold the bundled loans as securities. But when the market for these securities tanked in October 1998 and FirstPlus Financial was unable to find buyers, it was forced to hold the loans on its books, Mr. Carpenter said. Without the anticipated profit on securities sales, FirstPlus Financial lost millions.

In 1999, FirstPlus Financial filed for bankruptcy, and a year later, FirstPlus Bank  which in 1998 had turned a $12.7 million profit and had assets of nearly $300 million  was directed by the bankruptcy trustees credit committee to stop making high-loan-to-value loans and to find a buyer, Mr. Carpenter said. The two companies parent, FirstPlus Financial Group Inc., is responsible under bankruptcy law for its subsidiarys debts and can be required by the court to draw on other subsidiaries assets to satisfy the bankrupt units creditors, he said.

Because of the significant decline in loan originations and because it was repricing assets in anticipation of a sale, FirstPlus Bank lost $8 million in 2000, Mr. Carpenter said. In March, it sold its Irvine, Calif., branch to $440 million-asset Affinity Bank of Ventura, Calif., and in April it sold its San Clemente, Calif., branch to $90.7 million-asset American General Bank of Midvale, Utah. It expects to close the sale of its Citrus Heights branch to $255 million-asset Redding (Calif.) Bank of Commerce in June.

FirstPlus Bank also closed branches this year in the Northern California cities of Walnut Creek and Concord.

It will hang on to its remaining $30 million loan portfolio for as long as it can, however. Those loans are performing quite well, Mr. Carpenter said. They are still good earning assets for the trustee, and there is no particular urgency to sell them.

Eventually, though, the bankruptcy court in Texas will order the thrift to sell the portfolio and close up shop for good, but Mr. Carpenter could not say when that would happen.

FirstPlus Financial Group was a profitable company that had attracted the likes of former Vice President Dan Quayle to its board of directors.

And based on its 1998 results, FirstPlus Bank was ranked as Southern Californias most profitable financial institution in a study commissioned by The Los Angeles Times in 1999. This study said FirstPlus had a 4.5% return on assets in 1998, more than four times the average for financial institutions in Southern California.